Skellerup Annual Shareholders Meeting 2017

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Skellerup Holdings Limited
Annual Shareholders Meeting 25 October 2017
CEO’s Address
Thank you, Liz, good afternoon everybody.
Liz referred to the past year as having been a year of change, and it certainly has been that.
Change, rapid change, is something that we have become very familiar with in recent years.
I’m very pleased that we have anticipated many of those changes and adapted our business
accordingly. However, I am equally conscious of the need for, and the benefits of, stability and
continuity – especially in a volatile marketplace.
Possibly the most notable change in the past year – certainly the most tangible change – is the move
into our new dairy rubberware facility at Wigram. Before I talk more on this I would like to show you
a short video clip of this great new facility.
The move to Wigram is now complete. It is a first-class example of how resilient we are in the face of
adversity.
To me, as much as it showcases innovation, Wigram also represents a commitment to some
enduring fundamentals.
It demonstrates a commitment to Canterbury and to New Zealand that is part of who we are. It
demonstrates a commitment to agricultural and industrial customers that have played such a big
part in our success to date, and – perhaps most importantly – it demonstrates our commitment to
manufacturing excellence: to maintaining our unique mix of scientific, engineering, and technical
expertise that gives us such an advantage in meeting the needs of our customers both in New
Zealand and around the world.
And by meeting those needs, by providing our customers with better solutions, rather than just
enabling them to tweak their existing products, we build trust, loyalty, and the long-term
relationships that underpin our success.
I would like to take this opportunity to thank the Board for its support and the team in Christchurch
who have worked tirelessly to make this happen.
The other significant change has been our business focus. Over the past several years, we have
focussed our product development on solutions that are not dependent on commodity prices. The
past year produced strong results: a net profit after tax of $22.1 million – at the higher end of what
we had expected, and eight percent up on the previous year. Rising earnings in both the Agri and
Industrial divisions (and, importantly, good increases in earnings as a percentage of revenue in both
divisions), supported an increased dividend to shareholders.
The FY17 results that were reported to you earlier this year are briefly summarised on the screens
behind me. The annual report also gives some clear indications of where we think the business will
go over the current year and into the future.
For example, sales into the iron ore mining; and oil and gas sectors have been sluggish in recent
years, as low commodity prices have led to cuts in maintenance spending and reduced exploration

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activity. However, we have more than offset this negative impact with growth in revenue from sales
into potable water infrastructure and consumer applications.
Customers in the water and wastewater industries now generate more than a third of the Industrial
Division’s revenue.
Growing populations, changing weather patterns, ageing infrastructure and increasingly stringent
environmental standards are creating challenges for organisations charged with supplying drinking
water and removing and treating wastewater. In turn, they are challenging industry players to
develop products that get the job done more effectively, more efficiently, and with a balance of cost
and performance or features.
Our experience in developing and manufacturing food-grade rubberware – as well as in developing
components for equipment manufacturers in the automotive, appliance, oil, and gas industries, all of
which involve strict performance criteria and certification regimes – gives Skellerup a significant
advantage over other companies.
In the United States, for example, Skellerup is involved throughout the entire drinking water supply
process, from the reservoir to the tap, with our Gulf-branded components featuring in systems and
products manufactured by the likes of US Pipe, McWane, Charlotte Pipe, Moen, Kohler and Delta.
Australia is another market where long-term water security is a growing concern. We believe this
market offers considerable opportunities, both in drinking water and wastewater– and we are
working to develop those opportunities.
Seals and fasteners used in roofing applications also make a significant contribution to Industrial
Division revenues, and we expect to build on the past year’s sales growth in diverse markets
including Australia, Asia, the Middle East and the US.
Our Agri business has seen dairy commodity prices strengthen and stabilise. This has benefited our
New Zealand business, as farmers caught up on deferred maintenance during the winter months.
Looking ahead, with milk prices currently forecast to be better than the season just gone, we expect
a good year for domestic sales.
Internationally, we experienced increased demand in Europe towards the end of the past year, in
line with increased milk production. We also had a strong year in the US with demand solid
throughout plus we benefitted through liner innovation and the introduction of our milk filters into
this market. With Wigram now fully operational, we are focusing on achieving further growth in
overseas markets.
There is significant potential to increase sales in markets that are still developing such as Asia and
South America. Skellerup’s combination of key relationships and on-farm expertise gives us a
considerable advantage in growing our sales into these markets.
Building customer relationships and trust takes time – our team at Wigram is currently creating
products that will be used to milk cows that are yet to be born. However, taking the time to work
through the development process with the ultimate customers on the farm means that our products
become part of their processes, making it very difficult to remove them in favour of a rival offering.
A common thread across our Industrial and Agri Divisions is that in, many instances, we produce
essential components that have a crucial part to play. It may be in maintaining animal health or milk
quality, or in maintaining the weathertightness of a building or the integrity of a drinking water
supply network. Typically, if one of our products fails to do its job, the whole system is
compromised.
Our customers need to be able to trust us. And they can.
By developing and maintaining strong relationships with those customers and helping them to
succeed, while at the same time continuing to improve our own processes, we will continue to
create an organisation of which we can all be proud and deliver strong results for our shareholders.

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Of course, it is our people that are the key to our current and future success. We have some very
experienced and talented engineers, chemists, sales and operational experts. We have also
developed and will continue to develop a group of talented young leaders. These people are
showing that they can truly be international business people, and they are motivated to succeed.
I am confident we are moving in the right direction, and that we have in place the people and the
processes to improve our position and our performance in the year ahead. As noted in a release to
the NZX earlier today EBIT for Q1 of the current year is more than 10% of the comparable quarter of
last year. As a result we expect an improvement in underlying profitability for the FY18 year,
however given the season nature of our business it is too early in the year to provide any further
guidance.

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Skellerup Annual Shareholders Meeting 2017
25 October 2017

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Chair’s Address
Liz Coutts | Chair

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CEO’s Address
David Mair | CEO & Executive Director

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Skellerup FY17
NZ$ MillionFY17FY16FY15
Revenue79.279.680.5
EBIT19.818.822.1
EBIT %24.923.627.4
•EBIT up 11% in FY17.
•Revenue measured in constant currency up 5% in FY17 (for both Divisions).
•Agri: Recovery in international dairy price & strong footwear sales.
•Industrial: Growth in potable water, roofing and automotive applications. Improved cost structure.
NZ$ MillionFY17FY16FY15
Revenue131.2132.0123.0
EBIT17.115.314.0
EBIT %13.111.611.4
IndustrialDivisionAgriDivision
NZ$ MillionFY17FY16FY15
Revenue210.3211.4203.0
EBIT32.829.531.1
Finance expense(1.4)(0.4)(0.2)
Tax expense(9.3)(8.4)(9.0)
NPAT22.120.521.9

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Resolutions
Liz Coutts | Chair

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Shareholder Resolutions
Election of Director
David CushingIn favourAgainstAbstain
Postal Votes63,824,195319,0846,850
Proxy Appointee: Chair of the Meeting 524,676--
Proxy Appointee: Liz Coutts7,000--
Total64,355,871319,0846,850
•Proxy Appointee votes granted are all discretionary and will be voted in favour of the resolution.

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Shareholder Resolutions
Auditor’s Remuneration
In favourAgainstAbstain
Postal Votes63,701,830354,79924,000
Proxy Appointee: Chair of the Meeting 619,676--
Proxy Appointee: Liz Coutts7,000--
Total64,328,506354,79924,000
•Proxy Appointee votes granted are all discretionary and will be voted in favour of the resolution.

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Questions
Liz Coutts | Chair

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Acknowledgement for retiring Directors
Liz Coutts | Chair

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Dr Ian Parton

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Sir Selwyn Cushing

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Sir Selwyn Cushing
Sir Selwyn Cushing & Skellerup
•Association and contribution to Skellerup
since 1985.
•Appointed a director in 1986 as Brierley
Investments took a majority stake in the
company. Appointed Chairman in 1987 and
retired from the Board in 1992.
•Returned to the Board in 2007 at a time
when the company was carried high debt.
Appointed Chairman again in 2008 and
retiring today 10 years later leaving
Skellerup in a robust financial position with
a track record of strong earnings and
excellent prospects for growth.
•Chair of the Board:
‒1987 to 1992
‒1998
‒2008 to 2017

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Sir Selwyn Cushing
Skellerup Young Farmer of the Year Awards 1991
Appointed Chairman 1987

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Sir Selwyn Cushing
Sir Selwyn returns as Chairman of Skellerup 2008Retires as Chairman 1992

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Sir Selwyn Cushing
(left) Ground Breaking Ceremony November 2014
(above)Opening Ceremony November 2016

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Meeting Close
Liz Coutts | Chair

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Skellerup Holdings Limited
Annual Shareholders Meeting 25 October 2017
Chair’s Address
Good afternoon and welcome to this year’s Annual Meeting.
The past year has been a year of change for Skellerup, a year of growth and development, a year in
which the hard work of the past few years started to show through on the bottom line, and a year in
which we positioned ourselves for further and faster growth and development.
Skellerup as a company is many things.
We are a company that manufactures components for long-established, one might even call them
traditional, industries: but we do so using tools and techniques that are way out in front of the field
in terms of technical, chemical, and engineering innovation.
We are a Kiwi icon: we are also a truly international business.
And while we are a company with a proud history, we are also a company with an exciting future.
Over the course of this year, in my new role as Chair, I have spent a good deal of time reviewing
what Skellerup does and how we do it.
I have spoken to people throughout the business about where they see the opportunities for us to
grow and develop, and I have discussed with my fellow directors and with the Leadership Team how
we might refine our strategic direction to fully exploit our competitive advantages:
• technical know-how
• an ability to innovate
• a reputation for quality and reliability,
• strong relationships, and
• a global network
Increasingly, our opportunities lie overseas.
We now make products in North America, Europe and Asia, as well as in New Zealand, and we have
staff based in key markets around the world.
More than three-quarters of our revenue is generated overseas: the US is now our largest market,
and has significant potential to grow even further, while Europe and Asia also offer exciting
opportunities for both our Agricultural and our Industrial products and services.
Over the past few years, Skellerup has had to run hard to keep moving the business forward.
Turbulent times in global markets – particularly dairy, mining, and oil and gas – have forced us to
adapt fast, and to reshape and reorient our operations so as to ensure we are targeting the right
customers in the right industries.
Through that process, we have created a more secure business model, a strong and resilient
company with the right people in the right places, supported by the right structure.
We have maintained profitability while investing significantly in our infrastructure – most obviously
at Wigram, but also in the United States and in other markets around the world.

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We have also maintained a strong balance sheet; both the Agri and the Industrial Divisions
generated improved earnings in the past year, and that is reflected in an increased dividend
payment to shareholders, continuing the Board’s well-established practice of increasing dividends as
profit growth allows.
We have invested well, and the infrastructure we have created gives us a sound base for further
international growth. That growth may be organic, as much of our recent growth has been, but we
are also very willing to consider suitable acquisitions and other opportunities to build scale more
rapidly in order to take full advantage of the strong platform we have built.
As highlighted earlier increasingly the growth in revenue and earnings is and will come from our
business based outside New Zealand. This will impact on the extent to which we are able to fully
impute dividend payments in the future.
We have demonstrated that we can succeed in diverse markets overseas, we have a board with a
strong international perspective and an understanding of key markets, and a leadership team with
proven credentials.
We are proud to be a New Zealand company, and our home market will always be important to us,
but I expect our overseas operations to play an increasing part in Skellerup’s continuing growth and
development.
I referred earlier to this year as having been a year of change: one of the most significant changes is
Sir Selwyn Cushing’s retirement from the Board he has been part of for 10 years. Of course, Selwyn’s
involvement with Skellerup goes back much further having also chaired the company between 1987
and 1993.
Throughout his chairmanship, Selwyn placed considerable importance on maintaining a strong
balance sheet and a consistent dividend policy, and encouraged management’s continued delivery of
strong operating cash flow. That continues to underpin the Board’s confidence in our ability to
develop and grow the business both at home and, more particularly, overseas.
Selwyn was also closely associated with the development of our new Wigram facility. His
involvement in this highlighted his tenacity and determination, his vision for Skellerup and for New
Zealand manufacturing, and his remarkable network of friends and associates, many of whom
played important parts in the project’s successful conclusion.
I thank him for everything he has done for the company, and for the support and guidance he has
given me personally.
Ian Parton is also retiring after serving over 6 years on the Board. As it transpired with the
Christchurch earthquakes, we could not have appointed a more qualified and appropriate director
given Ian‘s civil engineering and leadership expertise. Ian‘s wise counsel, breadth of knowledge and
networks have been invaluable as we first considered, progressed and relocated our dairy rubber
ware operations from Woolston to Wigram in Christchurch. David will show you a video of our new
Wigram dairy rubber ware facility shortly. Thank you, Ian, for the contribution you have made to
Skellerup.
The Board has given considerable thought to our Board succession in recent years. As a part of the
succession, John Strowger and Alan Isaac were appointed to the Board in the last 2 and 1/2 years
providing Skellerup with the professional expertise and diversity of skills required. John is Chair of
our Health & Safety Committee and Alan has taken on the role of Audit & Risk Management
Committee Chair following my appointment as Chair of the Board in January this year.
In August the Board appointed David Cushing to enable a period of transition before the retirement
of Sir Selwyn and Ian. You will have the opportunity to ratify this appointment later today when
David offers himself for election.
David has had a successful career in business and investment banking, and has long played an active
part in managing the Cushing family’s investments, including their shareholding in Skellerup Group.

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The directors believe David’s experience across a broad range of industries including the rural sector,
combined with his financial and commercial expertise, make him a valuable addition to your Board
and we unanimously support his election later today.
We have directors with a range of skills, depth of knowledge and experience now on the Board.
However, we will continually consider if and when we need to add additional skills to grow the
business.
Finally, I would like to thank staff across the Group for their commitment and hard work.
I would also like to thank all shareholders for your support. We will continue to do everything we can
to justify that support.